Waiting for the Judge

WASHINGTON (04/03/2000) - The final ruling in the nearly two-year-old antitrust battle between the government and Microsoft could come as soon as Monday, following the collapse of settlement talks on Saturday. U.S. District Judge Thomas Penfield Jackson is widely expected to hand down a punishing verdict against the software giant, finding it guilty of multiple violations of the Sherman Antitrust Act, and perhaps various state antitrust statutes as well.

Chicago appellate judge Richard Posner, who mediated negotiations between Microsoft, the Justice Department, 19 states and the District of Columbia at Jackson's behest for more than four months, said Saturday that the gulf between the two sides was "too deep-seated to be bridged."

On Friday, Microsoft tendered its last settlement proposal in response to a government draft offered earlier in the week. While details of the offers weren't publicly revealed, the government offer didn't include breaking up the company, according to a source close to the case. Nevertheless, Microsoft's last offer fell too far short of the government's terms, effectively scuttling negotiations.

Posner passed Microsoft's latest offer to the government Saturday morning, and issued his statement ending the talks later in the day. Posner's annoucement surprised observers who expected talks focusing on restrictions on Microsoft's business practices to continue at least until Wednesday, and possibly longer.

"This result is disappointing ... because the public interest would be served by avoiding further litigation," Posner said, adding that he believed a settlement was "in the national interest."

That belief was apparently not shared by the two sides in the case, who couldn't bridge the divide separating them. Microsoft's motives to settle included avoiding potentially harsh punishment from Jackson, including a breakup, and liability in the dozens of private class-action suits filed since November. That's when Jackson labeling Microsoft a ruthless monopolist with a habit of crushing real and perceived threats to its Windows operating system monopoly. The government would have benefited from a settlement because it would have restrained Microsoft right away, and eliminated the uncertainty of years of appeals.

Throughout the talks, Microsoft stubbornly insisted on its "right to innovate."

The government side, which is confident it will win the case, remained haunted by a 1995 consent decree that contained a key loophole that allowed Microsoft to bolt its Internet Explorer Web browser to Windows, leading to the current case.

"We would have preferred an effective settlement to continued litigation," said Justice Department antitrust chief Joel Klein. "But settlement for settlement's sake would be pointless ... If Judge Jackson issues favorable conclusions of law, we will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice."

Microsoft chairman Bill Gates blamed the government for the failure of the talks.

"Ultimately, it became impossible to settle because the Department of Justice and the states were not working together," Gates said in a . "Between them, they appeared to be demanding either a breakup of our company or other extreme concessions that go far beyond the issues raised in the lawsuit." "The states together with Department of Justice exerted their best efforts to make this process successful during the four months in which we participated in this mediation," said Iowa Attorney General Tom Miller, who led the 19 states in their part of the suit.

"The attorneys general remain committed to our objectives and look forward to achieving them in continuation of the litigation before Judge Jackson."

Sources close to the case said Jackson might call the two sides into his chambers one last time before completely giving up on a settlement. If Jackson rules against Microsoft, he is expected to issue his instructions for a "remedy phase" at the same time as his ruling or within days thereafter. The remedy phase could include new courtroom arguments and testimony, or it could be limited to submission of affadavits and depositions.

Jackson has said that he would expect the Justice Department and its government partners to present a single remedy recommendation. Although the government camp has reportedly had internal differences, it's expected that government officials would be able to craft a consensus proposal for how to penalize Microsoft.

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